9 Things Boomers Must Do When Their Retirement Savings Reach $250K

A senior couple reviews their finances online.

Reaching a milestone of $250,000 in retirement savings is a significant achievement for baby boomers nearing or entering retirement. This level of savings provides a solid foundation for a comfortable retirement, but careful planning and strategic decisions are important to ensure it lasts. Here are essential steps boomers should consider to optimize their financial security and make the most of their retirement savings.

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Reassess Your Investment Strategy

Upon reaching $250,000, it’s important to evaluate your investment allocation. At this stage, your focus may shift from accumulation to preservation of capital and generating income.

Consider diversifying your investments to include a mix of stocks, bonds and other assets like annuities or real estate that can provide stable returns and minimize risk.

Plan for Healthcare Costs

Healthcare is one of the most significant expenses in retirement, often consuming a large portion of retirees’ budgets. According to Fidelity, an average retired couple age 65 may need approximately $315,000 saved to cover health care expenses throughout retirement.

To ensure you have adequate coverage, you should review your Medicare options as you approach retirement. You should also budget for out-of-pocket costs, which are not covered by Medicare. These can include co-payments, deductibles and other medical services, such as long-term care. Fidelity’s estimates suggest setting aside a 20% comfort buffer over your basic living expenses to cover unexpected healthcare costs effectively.

Calculate Your Retirement Income Needs

Understand how much you’ll need annually to maintain your desired lifestyle in retirement. Consider all income sources, including Social Security, pensions, rental income and withdrawals from your savings. A good guideline is the 4% rule. This rule suggests that you can withdraw 4% of your retirement savings in the first year of retirement, and adjust that amount for inflation in subsequent years, to ensure your savings last for approximately 30 years.

Optimize Social Security Benefits

Deciding when to start taking Social Security benefits can significantly impact your financial security. Delaying benefits until age 70 can increase your monthly payouts. Coordinate your Social Security claiming strategy with your spouse (if applicable) to maximize joint benefits.

Update Estate Planning

Ensure your estate planning documents are up to date, including your will, trusts, power of attorney and healthcare directives. Proper estate planning helps protect your assets and ensures they are distributed according to your wishes.

Create a Tax-Efficient Withdrawal Strategy

Work with a financial advisor to develop a withdrawal strategy that minimizes tax liabilities. This may involve tapping into taxable, tax-deferred and tax-free accounts in a specific order to optimize tax efficiency.

Explore Relocation Options

If high living costs in your current location are a concern, consider relocating to a state with a lower cost of living and favorable tax treatment for retirees. States like Florida, Texas and Nevada offer no state income tax, which can help stretch your retirement dollars further.

Maintain an Emergency Fund

Unexpected expenses can arise in retirement. Maintain an emergency fund to cover unforeseen costs without needing to liquidate investments under unfavorable conditions. A good rule of thumb is to keep three to six months’ worth of living expenses in easily accessible accounts.

Stay Flexible and Review Regularly

Retirement planning is not a set-and-forget process. Review your financial plan at least annually or when significant life changes occur. Adjustments may be necessary due to changes in your health, inflation, tax laws or investment returns.

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Final Take

Achieving $250,000 in retirement savings is a milestone that offers both security and opportunities. By taking proactive steps to manage investments, plan for healthcare, optimize income and prepare for potential risks, boomers can enhance their chances of a financially secure and fulfilling retirement. Remember, consulting with financial professionals can provide personalized advice tailored to your specific circumstances.

Editor’s note: This article was produced via automated technology and then fine-tuned and verified for accuracy by a member of GOBankingRates’ editorial team.

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